Beam v. Almond , 271 N.C. 509 ( 1967 )

157 S.E.2d 215 (1967) 271 N.C. 509

Addie S. BEAM
v.
Edmond D. ALMOND and wife, Bertha J. Almond, Cleveland Savings and Loan Association, a corporation, and Lloyd C. Bost, Administrator of the Estate of Bayard Thurman Falls, Sr., Trustee, Deceased.

No. 194.

Supreme Court of North Carolina.

October 11, 1967.

Joseph M. Wright and Reuben L. Elam, Shelby, for plaintiff appellant.

Falls, Hamrick & Hobbs, by L. L. Hobbs, Shelby, for defendant appellees.

PARKER, Chief Justice

Judge Falls erred in allowing the motion to dismiss the present action and taxing the costs against the plaintiff.

In Hayes v. Ricard, 251 N.C. 485, 112 S.E.2d 123, it is said:

"The general rule is well settled that the doctrine of res judicata, whereby a judgment bars a subsequent action on the same cause of action, and renders the judgment conclusive on the issues adjudicated, applies only to the parties to the action in which the judgment was rendered, and the privies of such parties. Bennett v. Holmes, 18 N.C. 486; Meacham v. Larus & Bros. Co., 212 N.C. 646, 194 S.E. 99; Rabil v. Farris, 213 N.C. 414, 196 S.E. 321, 116 A.L.R. 1083; North Carolina Corporation Commission v. United Commercial Bank, 220 N.C. 48, 16 S.E.2d 473; Cannon v. Cannon, 223 N.C. 664, 28 S.E.2d 240; 30A Am.Jur., Judgments, Sec. 396; 50 C.J.S. Judgments § 762.

* * * * * *

"A former judgment of nonsuit is res judicata as to a second action, only when it is made to appear that the former adjudication has been on the merits of the action, and it appears to the trial court, and is found by such court as a fact, that the second action is between the same parties in the same capacity or quality, and their privies, and is based upon substantially identical allegation and substantially identical evidence, and that the merits of the second action are identically the same. Kelly v. Kelly, 241 N.C. 146, 84 S.E.2d 809; Craver v. Spaugh, 227 N.C. 129, 41 S.E.2d 82; Hampton v. Spinning Co., 198 N.C. 235, 151 S.E. 266; 17 Am.Jur., Dismissal, Etc., p. 162; 27 C.J.S. Dismissal and Nonsuit § 56, p. 404; 30A Am.Jur., Judgments, Section 398."

This is said in Walker v. Story, 256 N.C. 453, 124 S.E.2d 113:

"Reference is made in Hayes v. Ricard, supra, to the well established rule that ``(a) judgment rendered in an action estops the parties and their privies as to all issuable matters contained in the pleadings, including all material and relevant matters within the scope of the pleadings, which the parties, in the exercise of reasonable diligence, could and should have brought forward.' Bruton v. Carolina Power & Light Co., 217 N.C. 1, 6 S.E.2d 822. But this rule is applicable where, as held in Hayes v. Ricard, supra, the judgment in the prior action constitutes an adjudication thereof upon the merits, not to a judgment of involuntary nonsuit entered on account of the insufficiency of plaintiff's evidence. Kelly v. Kelly, supra, 241 N.C. p. 150, 84 S.E.2d p. 809.

* * * * * *

"Whether the judgment in the prior action is a bar to the present action depends upon whether the evidence presented by plaintiff herein is substantially the same as that offered by plaintiff upon trial of the prior action. ``A plea of res judicata cannot be determined on the pleadings alone, but only after the evidence is presented.' Hall v. Carroll, 253 N.C. 220, 116 S.E.2d 459; Hayes v. Ricard, supra."

A judgment based on matters of practice or procedure is not a judgment on the merits. Hayes v. Ricard, supra.

In United States v. California Bridge & C. Co., 245 U.S. 337, 38 S. Ct. 91, 62 L. Ed. 332, the Court said:

"The doctrine of estoppel by judgment, or res judicata, as a practical matter, proceeds upon the principle that one person shall not a second time litigate, with the same person or with another so identified in interest with such person that he represents the same legal right, precisely the same question, particular controversy, or issue which has been necessarily tried and finally determined, upon its merits, by a court of competent jurisdiction, in a judgment in personam in a former suit."

So far as the record before us discloses, Judge Falls heard no evidence in the former action and heard no evidence in the second action. In the present action, Cleveland Savings and Loan Association, which, according to the allegations of the complaint in the present action, holds a note executed by defendants Almond and secured by a deed of trust upon the house and lot which is the subject matter of this action, in which deed of trust B. T. Falls, Sr., now deceased, was named as trustee, and Lloyd C. Bost, administrator of the estate of B. T. Falls, Sr., trustee, deceased, have been brought in as additional parties defendant. It is manifest that there has been no adjudication on the merits. Therefore, the former judgment in the first case is not a bar to the present action, and Judge Falls erred in dismissing the present action on the ground that plaintiff is now estopped by the judgment entered in the former action to prosecute the present action.

Each party defendant in the present action filed a demurrer to the complaint in the present action, as set forth above. On motion of plaintiff, the instant action came on for hearing upon the demurrers filed by defendants at the 13 February 1967 Session of Cleveland County Superior Court. The Honorable W. K. McLean, judge presiding, entered an order overruling the demurrers and allowing defendants thirty days to file answers. According to the record before us, there was no exception taken to this order of Judge McLean.

In the Supreme Court all the defendants herein filed a demurrer ore tenus upon the following grounds, in substance: (1) The complaint does not state facts sufficient to constitute a cause of action against defendants Edmond D. Almond and wife, Bertha J. Almond, in that it fails to state with particularity the essential facts to constitute a cause of action for fraud, or a cause of action for undue influence, or a cause of action for mental incapacity; (2) the complaint attempts to allege an anticipatory breach of contract wherein the defendants Almond were to have possession of the land of the plaintiff in return for their promise to support her; however, no breach thereof is alleged; (3) the complaint fails to state a cause of action against the defendant Cleveland Savings and Loan Association and its trustee, since upon the face of the complaint said defendant Savings and Loan Association is the bona fide holder of a first lien secured by a deed of trust for purchase money on the property which is the subject matter of this action, the loan having been made to defendants Almond to furnish them purchase money and that the prayer of the plaintiff will not in any wise affect the status of this lien; (4) several causes of action have been improperly united for that the plaintiff asks to unite an alleged cause of action to rescind her deed with alleged causes of action to destroy a lien held by another defendant, and a cause of action alleging the anticipatory breach of contract between the plaintiff and the defendants Almond, which alleged causes of action are not separately stated, do not belong to one class and do not affect all parties named as defendants herein.

This is said in 1 Strong's N.C.Index 2d, Appeal and Error, § 10: "A defendant may file a demurrer ore tenus in the Supreme Court on the ground that the complaint, together with any amendment thereto, fails to state facts sufficient to constitute a cause of action."

On a demurrer ore tenus to the complaint, we take the case as made by the complaint. It is hornbook law that the office of a demurrer is to test the sufficiency of a pleading, admitting for the purpose, the truth of factual averments well stated and such relevant inferences as may be deduced therefrom, but it does not admit any legal inferences or conclusions of law asserted by the pleader. It is also common knowledge of the Bench and the Bar that the court is required on a demurrer to construe the complaint liberally with a view to substantial justice between the parties, and every reasonable intendment is to be made in favor of the pleader. G.S. § 1-151; Bailey v. McGill, 247 N.C. 286, 100 S.E.2d 860, and cases cited.

Plaintiff alleges, inter alia, that at the time of the transaction complained of she was 70 years old, very ill, was a patient in a home for the aged, and was under the influence of heavy stimulants and drugs and therefore incapable of understanding what she was doing, all of which was well known to the defendants Almond; that said defendants Almond had gained ascendency and domination over her will through twelve years of friendship and by their persistent domination over her affairs; that they fraudulently procured her signature to a deed which she understood to be a contract in which she agreed to give defendants Almond her house and lot, which is the subject matter of this action, at her death in return for their promise to support her in her home for the rest of her life and to pay her burial expenses upon her death; and that her deed to the defendants Almond is without consideration, fraudulent and void, and should be cancelled. During the month of August, 1965, she learned that defendants Almond were attempting to sell her property and put her out of her own home. At this time she asked defendants Almond to explain, and was told by them that they had a deed for her home and had a right to sell it.

Although fraud is not alleged in all of its elements with the particularity required by our decisions, Davis v. Davis, 256 N.C. 468, 124 S.E.2d 130; New Bern v. White, 251 N.C. 65, 110 S.E.2d 446, and although the complaint does not allege that the plaintiff relied on any misrepresentations and was induced thereby to act to her damage, 2 Strong's N.C.Index, Fraud, § 8, yet it is our opinion, and we so hold, that construing the complaint liberally with a view to substantial justice between the parties, G.S. § 1-151, in the light of the principles of law set forth in 2 Strong's N.C.Index 2d, Cancellation of Instruments, § 3, and 13 Am.Jur.2d, Cancellation of Instruments, §§ 13, 14, 29, and 30, it contains sufficient allegations of fact tending to show undue influence on the part of defendants Almond and mental incapacity as to plaintiff. However, plaintiff has not alleged restoration of her mental capacity as required by Davis v. Davis, 223 N.C. 36, 25 S.E.2d 181. The demurrer ore tenus filed in this Court by the defendants Almond is sustained with leave to plaintiff to file an amended complaint, if she so desires, as to them.

The fourth ground of the demurrer ore tenus, to wit, improper joinder, filed in this Court by all the defendants will not be considered, for the reason that such a question cannot be raised by demurrer ore tenus in the Supreme Court. Raleigh v. Hatcher, 220 N.C. 613, 18 S.E.2d 207; G.S. § 1-127(6); G.S. § 1-134. However, it appears that there has not been an improper union of several causes. G.S. § 1-123(1); Goodson v. Lehmon, 225 N.C. 514, 35 S.E.2d 623, 164 A.L.R. 510.

These are the only allegations in the complaint in the present action in respect to defendants Cleveland Savings and Loan Association and Lloyd C. Bost, administrator of the estate of B. T. Falls, Sr., trustee, deceased, except in the prayer for relief which asks that the deed of trust to it be set aside and declared null and void:

"XV. That on or about March 28th, 1964, the defendants, Edmond D. Almond and wife, Bertha J. Almond, executed and delivered to the defendant Cleveland Savings & Loan Association, a note in the original sum of Seven Thousand ($7,000.00) Dollars secured by a deed of trust purporting to constitute a lien on the property described above and the subject matter of this action.

"XVI. That the defendant, Bayard Thurman Falls, Sr., was named in said deed of trust as trustee; that the said Bayard Thurman Falls, Sr., trustee, died on August 28th, 1966.

"XVII. That this is an action to set aside a deed to property in which the defendants Cleveland Savings & Loan Association and Lloyd C. Bost, Administrator of Estate of Bayard Thurman Falls, Sr., have an interest and whose rights may be affected and are made parties hereto so that they may defend their rights therein."

In Randolph v. Lewis, 196 N.C. 51, 144 S.E. 545, 62 A.L.R. 1474, the third headnote in our Reports states:

"Where a note is given by a husband and wife, and the husband procures her execution by duress, the note is voidable only, and is good in the hands of a holder in due course for value, and without notice of the duress. The distinction between duress in the procurement of the execution and duress in the execution pointed out by Adams, J."

The Court in its opinion said:

"Duress in the inducement exists where the party subjected to the duress intends to execute the contract and such intention is caused by duress. In this event the contract is voidable. ``A contract made under duress is ordinarily voidable and not void, for the consent is present, although not such a free consent as the law requires.' 13 C.J., 398, § 311.

"It is well settled that as between the immediate parties—here the defendant and her husband—duress in obtaining her signature to the note would be a good defense; it would likewise be a good defense against a holder with notice. The appellant does not contend that the plaintiff, the payee in the notes, had any knowledge of the alleged duress. The notes represent the price of an automobile purchased from the plaintiff and used by the defendant and her family. The authorities uniformly support the position that where the grantee in a deed or the payee in a note has neither instigated the duress, nor connived at it, nor had knowledge of it, duress by others is not ground for avoiding the contract. Wells Fargo Bank v. Barnette (C.C.A.), 298 F. 689, 43 A.L.R. 916; Meyer v. Guardian Trust Co. (C.C.A.) 296 F. 789, 35 A.L.R. 856; White v. Graves, 107 Mass. 325, 9 Am.Rep. 38; Green v. Scranage, 19 Iowa 461, 87 Am.Dec. 447. This principle is embodied in our statute law. If in a conveyance of land by a husband and his wife the private examination or acknowledgment of the wife is procured by fraud or duress exercised by the husband, the conveyance is not thereby invalidated unless it is shown that the grantee participated in the fraud or duress. C.S., 1001. In the following cases the party who had instigated the duress sought to take advantage of his own wrong: Heath v. Cobb, 17 N.C. 187; Meadows v. Smith, 42 N.C. 7; Edwards v. Bowden, 107 N.C. 58, 12 S.E. 58. See Harshaw v. Dobson, 64 N.C. 384; S.C., 67 N.C. 203. We find no error in the conclusion that upon the verdict as returned the plaintiff is entitled to judgment."

In an annotation in 4 A.L.R. 864, at 864, it is said:

"The great weight of authority is to the effect that the validity of a contract is not affected by the fact that its execution was induced by duress, practised by a stranger thereto, where such duress was not committed with the knowledge or consent of the obligee. In other words, duress exercised by a third person does not affect the rights of an obligee who does not participate therein."

The annotation cites in support of the text cases from 25 states of the United States, and England. It cites the North Carolina cases of Butner v. Blevins, 125 N.C. 585, 34 S.E. 629, and Davis v. Davis, 146 N.C. 163, 59 S.E. 659. See to the same effect Annot. 62 A.L.R. 1477; 36 Am.Jur., Mortgages, § 93.

This is said in 59 C.J.S. Mortgages § 234:

"Although a conveyance of land may be voidable for fraud in the hands of the original grantee, if he has given a mortgage on the premises to one advancing his money in good faith and without notice of the fraud, such claim of fraud cannot be set up against the mortgagee. The rule is otherwise if knowledge of the fraud can be brought home to the mortgagee or if the fraud practiced on the grantor was such as to make his conveyance absolutely void; and, in an action to set aside the conveyance for fraud, the burden of proof of want of such knowledge is on the mortgagee.

"Mental incompetency. It has been held that bona fide mortgagees of a grantee whose conveyance is absolutely void by reason of the grantor's insanity do not stand in the relation of bona fide purchasers and are not protected. It has also been held that one who accepts a note and deed of trust to secure it from an insane maker, without knowledge of such infirmity, is not protected as an innocent purchaser."

In order to render a deed void on the ground of mental incompetency, it should appear that the grantor was laboring under such a degree of mental infirmity as to make him incapable of understanding the nature of his act. 26 C.J.S. Deeds § 54 at 721.

This is said in Davis v. Davis, 223 N.C. 36, 25 S.E.2d 181:

"When the grantor in a deed brings an action to set aside and cancel his deed and alleges and offers evidence tending to prove that at the time of the execution of the deed he did not have sufficient mental capacity to make a deed or to know and understand the nature and extent of his acts, it is necessary in order to maintain the action in his own behalf to allege and prove a restoration of his mental capacity; otherwise, he is presumed to be incompetent to bring the action."

The demurrer ore tenus in this Court states that the Cleveland Savings and Loan Association "is the bona fide holder of a first lien secured by a deed of trust for purchase money on the property which is the subject matter of this action, the loan having been made to the defendants Almond and wife to furnish them purchase money." This is a speaking demurrer in this respect for such allegations of fact do not appear in the complaint. Construing the allegations in the complaint against Cleveland Savings and Loan Association and the trustee named in its deed, and in connection with the complaint as a whole, it is manifest that in respect to alleged fraud and alleged undue influence the complaint does not allege that the Cleveland Savings and Loan Association in any way participated in or had knowledge of the alleged fraud and alleged undue influence perpetrated upon plaintiff by the defendants Almond; and, in respect to mental incompetency, even if we concede, construing the complaint liberally with a view to substantial justice between the parties, that it contains allegations sufficient to allege that the plaintiff was suffering under such a degree of infirmity as to make her incapable of understanding the nature of her act when she executed the deed to the Almonds, yet the complaint does not allege any restoration of her mental capacity. The demurrer ore tenus interposed in this Court by the Cleveland Savings and Loan Association and Bost is sustained with leave to plaintiff to file an amended complaint, if she so desires, as to them.

It is to be noted that Judge McLean overruled the demurrers to the present complaint filed by all the defendants in this action. We have taken this action in sustaining the demurrer ore tenus filed in this Court by all the defendants for the following reason: "If the cause of action, as stated by the plaintiff, is inherently bad, why permit him to proceed further in the case, for if he proves everything that he alleges he must eventually fail in the action." Amazon Cotton Mills Co. v. Duplan Corp., 246 N.C. 88, 97 S.E.2d 449; Maola Ice Cream Co. of North Carolina v. Mayola Milk & Ice Cream Co., 238 N.C. 317, 77 S.E.2d 910.

It seems apparent from the record before us that the statutory procedure has not been followed to have a person appointed as substitute trustee in the deed of trust instead of B. T. Falls, Sr., deceased. G.S. § 36-18.1.

The result is the judgment dismissing the action is reversed. The demurrer ore tenus filed in the Supreme Court by all the defendants is sustained with leave to plaintiff to file an amended complaint if she so desires.